Dollars in the diaspora
DESPITE BEING one of the richest countries in the Caribbean, Barbados confronts two crucial factors that must be reckoned with in weighing potential strategies for – and the merits of – a diaspora oriented investment initiative: public debt and exchange rate controls.
In 2013 Barbados’ debt to GDP-ratio was 90.5 per cent, which placed it just below Jamaica and a handful of Organisation of Eastern Caribbean States microstates. Although most of the country’s debt is domestic, its large fiscal deficits remain a concern.
That said, Barbados is otherwise known for discipline when it comes to financial affairs, a fact that has played no small role in making it one of the Caribbean region’s largest financial services hubs, with major onshore and offshore sectors. Barbados maintains some of the strictest exchange rate controls in the Caribbean, pegging its currency to the United States (US) dollar at a 2:1 ratio.
Although this enhances exchange rate stability, it also raises assets prices. These two macroeconomic issues – high public debt and strict exchange rate controls – affect the diaspora as they would any other foreign investors.
Unlike Jamaica and St Lucia, both of which have created policies and political units dedicated to deeper political and economic engagement of the diaspora, Barbados, like Trinidad and Tobago, has taken a less active approach toward creating these types of ties.
The difference could be correlated to their relative wealth vis-à-vis other countries in the Caribbean and the limited role of remittances in the local economy. Either way, given the perpetual need for hard currency, diaspora returnees do play an important role in repatriating capital to the country, especially by building homes.
In turn, the residential construction market creates jobs. Although exact figures remain elusive, it is widely agreed that tens of thousands of Barbadians have migrated overseas during the last century.
Unlike Jamaica and Trinidad and Tobago, where immigration corresponded first to the United Kingdom (UK) and later to Canada and the US, Barbadians have headed in various directions, including the UK and various British dependencies in the Caribbean. Moreover, long-standing Barbadian diaspora communities live in both Panama, as a result of migration to help build the canal, and Haiti.
Barbados itself does not maintain a systematic and reliable set of statistics on either emigration or immigration, so domestic sources do not capture the quantum of the diaspora.
Consequently, overall statistics on the diaspora are relatively weak, and conjectural estimations place the total diaspora at approximately 100 000.
According to the United Nations, this figure includes 55 000 migrants in the US, just under 18 000 in Canada, and just over 20 000 in the United Kingdom and Europe.
Although a degree of uncertainty surrounds the accuracy of Barbados emigration and immigration statistics, it remains clear that significant emigration has occurred from the country over time.
Dr Keith Nurse, a leading authority on Caribbean migration who is based in Barbados, notes that migration from Barbados has been taking place far longer than in other nations in the region.
As noted, a significant migration to Panama took place in the early 20th Century. Moreover, migration to Haiti has been ongoing. Both of these populations are characterised by modest economic achievement.
The community in the United Kingdom started off squarely in the working class following migration in the 1960s but has seen some relative prosperity over the last 50 years.
Finally, more recent movement to Canada and the United States is led by a cadre of middle class professionals, as is consistent with the rest of the Caribbean.
Barbados engages with its diaspora through its consular missions in particularly active communities such as New York, London, Miami, Washington, and Toronto.
These hubs also tend to have cultural organizations, old boys and old girls networks, and professional organisations for groups like nurses or the police.
Additionally, the Barbados Investment and Development Corporation maintains an online community called the Barbados Network, although this site has not been updated regularly.
Leveraging these communities and the consular network, the Government promotes investment in the country – either from the diaspora or from overseas investors in general, through Invest Barbados, its investment promotion agency.
The agency focuses specifically on investment opportunities in key strategic sectors such as information technology, offshore banking, and manufacturing.
Given its well-educated English-speaking population, highly subsidised education system, and access to graduates of the local campus of University of the West Indies, Barbados has built a hub of high value added knowledge-based services that are integral to the country’s offshore financial services sector.
Foreign clients for the local services sector include Canadian financial services firms such as Scotia, CIBC, and RBC, as well as Caribbean players like First Citizens and Republic Bank.
Services include accounting and business process outsourcing. Invest Barbados seeks out and presents projects, looking to raise capital for potential investors, but given the limited local investment culture, based on interviews with market actors, most diaspora investment tends to be made by owners of small businesses who will also run these businesses.
These businesses are typically in the business processing outsourcing sector but can also include garment production.
Additionally, the Barbados Investment and Development Corporation manages 12 industrial estates and facilitates foreign direct investment for people who are seeking to establishes businesses on these properties.
They focus particularly on four sectors that have been defined as strategic sectors by the Government of Barbados: manufacturing, ICT, tourism, and financial services. They also operate a co-working space with an incubation programme and technical assistance grants of up to $50 000 for export focused businesses that are targeting the diaspora.
Information taken from new World Bank study Investing Back Home: The Potential Economic Role Of The Caribbean Diaspora.